Thursday, July 9, 2009

Stimulus spending now starting to kick in!

Below is an update of a graph that I have been posting from time to time showing "Net Spending" (5-day average of daily Treasury withdrawals minus deposits). The trend has recently begun to rise, meaning that net transfers to depository institutions from the Treasury are accelerating. From early May thru June this trend had been slowly declining, with a rapid drop in the third week of June. The stock market was clearly affected by this: it killed the rally. While the stock market is currently weak, the significantly higher spending is likely to have a bullish effect on the economy and, hence, the market. So if you are not in or have been getting nervous and thinking of selling, I would advise against it. Now's not the time to sell; it's the time to buy!

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